Europe caprolactam sellers seek August price hikes

05 August 2009 15:46  [Source: ICIS news]

By Julia Meehan

LONDON (ICIS news)--European caprolactam sellers are to seek August price increases due to higher benzene costs and a tight supply situation, producers said on Wednesday.

“We have just started our discussions and [the August caprolactam contract price] will be a three-figure increase…benzene is up another €88/tonne ($128/tonne) and [caprolactam] availability is tight, so there is lots of pressure coming from the producer side,” said one producer.

Another producer said: “I am fed up saying to polyamide 6 producers that I need at least the benzene, and for August €120/tonne ($174/tonne) is what I have mentioned.

“I am buying as much material as possible because we are short on product, not because we are not producing, but because we are getting many enquiries from all over the world,” the producer added.

Because of the sharp increase in the value of caprolactam in Asia compared with values in Europe, European producers have been flaking caprolactam for shipment to Asia.

Caprolactam prices in Asia have been firming on a weekly basis since March.

According to global chemical market intelligence service ICIS pricing, caprolactam in the key Chinese market was valued at $2,150-2,200/tonne CFR (cost and freight) China, up $1,000/tonne compared with the first weeks of trading in 2009.

Market sources have attributed the gains to higher benzene values and tighter supply as a result of production cutbacks.

The June caprolactam contract settled at a pre-discounted price of €1,568-1,624/tonne FD (free delivered) NWE (northwest Europe).

“Caprolactam in Europe is completely undervalued and the longer the lower prices continue, the less volume there will be in Europe,” said a producer.

“The consumption is higher because orders are increasing…this is the situation and if this continues I foresee bigger problems, because there is no product in the chain,” the producer added.

Another supplier said: “There is a lot of flaking going on and demand is better, and this is what is driving the market.”

The selling source also spoke about the recent lack of visibility in the market, saying that this was slowly improving.

“Compared to April and May, visibility has increased and we have moved away from this two-week thinking and back to four weeks. But we are far away from planning three to four months ahead,” he said.

As European caprolactam buyers were bracing themselves for another price increase, they continued to express the difficulties they faced when trying to recover costs in the polyamide 6 market.

“Suppliers are trying to recover the maximum, but I think [the August contract price] could be half – not the full – benzene, since we paid close to the full benzene in June and July,” said a major buyer.

“We are not able to pass this increase on month by month and we are losing margin…more than benzene is not acceptable,” the buyer added.

A second European consumer described the €88/tonne benzene increase as “a disaster”.

“We [the producers] have absorbed benzene in June and July and now August. When we sell fibres, we are not recovering a single penny. It’s just not reasonable to sell polymer and buy caprolactam at the same price,” said the source.

“[Polyamide 6] producers continue to create their own problems and it would help if they bought less caprolactam and stopped producing so much polymer,” concluded a European caprolactam producer.

Major European caprolactam producers include BASF, Domo Caproleuna, DSM and LANXESS.

For more on caprolactam visit ICIS chemical intelligence
To discuss issues facing the chemical industry visit ICIS connect

By: Julia Meehan
+44 20 8652 3214

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